At LCollect we believe that knowledge is power. Every month our debt collection blog gives you practical tips, stories and news from around Australia and the world.
The warning comes following a complaint by a consumer that if she wanted to dispute a debt that she should raise the dispute with them but pay the debt to them in the meantime.
A spokeperson for the Commerce Commission said in a statement that the debt collection agency was incorrect in this advice as the debt collection agency had in fact purchased the debt and that the dispute should be handled by them. The Commission went on to say that it has also warned the debt collection agency to take care in the future to avoid making statements to debtors which may give the impression that Court action was inevitable if the debtor did not make immediate payment.
Commissioner, Anna Rawlings, said, "While debt collectors often need to discuss the nature of a debt and the consequences of non-payment with a debtor, they must not use misleading techniques to pressure debtors into paying or to deter them from pursuing genuine disputes. This includes saying that a debtor cannot dispute a debt, telling them that court action will commence within a certain timeframe when it may not or giving the impression that certain outcomes are inevitable if they are not."
While there may be differences in the legislation surrounding debt collection practices in New Zealand and Australia this article should serve as a timely reminder of your obligations under the Debt Collection Guidelines: for Collectors and Creditors with a specific focus on s13 of the Guidelines regarding disputed liability and s19 of the Guidelines regarding Representations about the consequences of non-payment.
A debt collection agency who act for Telstra has lost their case in the Federal Court following proceedings being commenced by the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).
The proceedings, which commenced in June 2016, highlighted the pressure some agencies apply to collect payment including engaging in misleading, deceptive and unconscionable conduct in it's dealings with 2 particular customers.
The first customer, CT*, who was living in a care facility on a disability support pension, after having suffered 3 strokes, received in excess of 60 demands for payment for a debt of $5,770. The Court found that the agency knew of CT's condition, which left him with the inability to care for himself or readily speak, however called the care facility approximately 40 times and sent approximately 20 demand letters seeking payment. Several times CT was threatended with legal action despite the agency not having any plans to follow through with the threat.
In the other matter a single Victorian mother of three, who worked part time and received a Centrelink payment, was demanded to pay $3,150. It was alleged that the woman was told that legal proceedings would be commenced against her and that a payment default would be recorded. The woman in question promised a payment of 50% of the debt in an attempt to avoid legal proceedings, despite this payment leaving her unable to pay rent and meet her other day-to-day expenses.
The Judgment, which you can read online, also criticises the capitalised use of words in demand letters and the use of “the words 'could' and 'may' would reasonably be read in the light of the prominent heading to the pro forma letter, the terms of which strongly suggest that ACM intended shortly to commence legal proceedings .....".
In a statement to the media the ACCC said that they will be seeking Orders preventing agencies engaging in misleading, deceptive and unconscionable conduct and will be seeking for large fines to be imposed.
Source: itnews - July 2018
* Name noted as per the original Judgment
Cash Converters has again found itself in the spotlight for all the wrong reasons with ASIC finding that the company failed to meet regulatory guidelines and breaching the ASIC and ACCC Debt Collection Guidelines.
An ASIC investigation found that the pay day lender routinely breached the frequency of contact guidelines of 3 times per week or less than 10 times a month -
5. Frequency of Contact
(c) Unnecessary or unduly frequent contacts may amount to undue harassment of a debtor. We recommend that you do not contact a debtor more than three times per week, or 10 times per month at most (when contact is actually made, as distinct from attempted contact) and only when it is necessary to do so. This recommendation does not apply to face-to-face contact which is specifically addressed below.
The investigation also uncovered that a related company, Safrock Finance Corporation (QLD), was also found to have provided incorrect information to a credit reporting agency. The error resulted in 38,500 customer being reported inaccurate amount owing over a 1 month period. According to ASIC the financier has since worked with Equifax to ensure all incorrect credit listings have been removed.
ASIC has since imposed licence conditions on Cash Converters which includes outsourcing all of their debt recovery to a 3rd party collection agency and must seek consent from ASIC prior to bringing these activities back in-house.
In retribution this time around, Cash Converters has paid $650,000 in community benefits payments to the National Debt Helpline for breaching the Guidelines.
Peter Kell, ASIC Deputy chair, said in a statement to the media, "Consumers expect to be treated fairly and in a manner that complies with consumer protection laws. ASIC expects all financial service providers to have appropriate systems and controls in place to ensure that debt collection practices are consistent with the guidelines. It is also critical that licensees ensure that credit information provided to credit bureaus is accurate."
This is not the first time that Cash Converters has been investigated by ASIC. You may recall that in our May 2017 blog post that Cash Converters were fined and paid $1.35 million in penalties for breaching responsible lending conduct provisions and refunded consumers $10.8 million in fees through a consumer remediation program.
You can download a copy of the ASIC and ACCC Debt Collection Guidelines from their website.
Source: TheAdvisor - May 2018
Fox Symes and Associates have recently been fined $37,800 in penalties for making potentially misleading statements in their advertising.
Following an investigation by the Australian Securities and Investments Commission (ASIC) they found that the debt management firm undertook a number of potentially misleading representations on their website, banner advertisements and Google ads. These representations included "Free Debt Assistance", "reduce Debt in Minutes" and "15sec Approval".
The concern of ASIC in this instance was that the statements being made misrepresented the speed and cost of Fox Symes and issued the company with 3 infringement notices. In a statement to the media ASIC Deputy Chair, Peter Kell, said, "Debt management firms are often engaging with particularly vulnerable consumers who are seeking assistance with their debts. They should be careful not to misrepresent their services using high impact terms like ‘free’, ‘minutes’ and ‘seconds’ suggesting that debt assistance will be quick and at no cost".
Fox Symes have since voluntarily amended it advertising once ASIC highlighted the issues. ASIC have indicated that payment of an infringement notice is not an admission of contravention, but rather, they can issue an infringement notice where they have reasonable grounds to believe a person or corporation may have contravened consumer protection laws.
Source: AustralianBroker - May 2018
A total of 278,683 Radio Rental leases that led to poor outcomes for consumers has resulted in ASIC pressuring parent company, Thorn Australia, to issue $19.9 million in refunds.
The action comes after ASIC filed proceedings in the Federal Court where ASIC proposed a $2 million penalty in addition to the $11.8 million the company has already refunded to affected consumers for not upholding responsible lending practices. A further $6.1 million will also need to be paid to cover refunds and defaults for 60,000 leases and potentially a further $200,000 more in costs to ASIC.
This is seperate to thet $50 million class action that was filed by law firm Maurice Blackburn in March 2017.
2 of the examples provided to the Federal Court of irresponsible lending include:
The Australian Securities & Investments Commission ("ASIC") has commenced legal proceedings against a Queensland based credit repair business for allegedly making false or misleading representations and allegedly engaging in unconscionable conduct.
The business, Malouf Group Enterprises Pty Ltd, who trade under several names including Credit Clean Australia, Credit Wash, Credit Clean Australia and Clear Your Credit, have had Court action commenced following an investigation by ASIC that alleges between 01/01/2014 and 31/12/2015 that representations were made that they could remove negative listings from an individuals credit file when nothing could be done about the listings. ASIC also allege that in several cases there was nothing wrong with the consumers individual credit file.
ASIC is seeking the following Orders that:
ASIC are also seeking maximum penalties to be imposed by the Court for breaches of Australian Consumer Law which are $1.1 million for corporations and $220,000 for an individual.
The case has been set down for a Directions Hearing in the Brisbane Federal Court on 12 July 2017.
A phone book publisher, Local Blue Pages, has been fined $40,000 by the Magistrates' Court for coercive debt collection.
The phone book, which is primarily delivered in the Melbourne metropolitan area, contains advertisements from small businesses however following an investigation by Consumer Affairs Victoria it was found that Local Blue Pages had harassed 4 advertisers between 2014 and 2016 using illegal debt collection tactics.
These tactics included:
A Queensland based private investigator has failed to have his licence re-instated after using information illegally obtained from 2 Queensland police detectives from a police computer system.
The Office of Fair Trading ("OFT") refused to renew the private investigators licence after being advised that the person in question had been convicted of several counts of computer hacking and misuse under Chapter 37 of the Queensland Criminal Code. The investigator illegally gained access to car registration details, addresses, phone numbers, criminal histories and other information and was subsequently sentenced by the Magistrates' Court to 18 months' probation and 240 hours of community service with no conviction recorded.
The decision by the OFT was subsequently appealed by the private investigator where the Queensland Civil & Administrative Tribunal ("QCAT") upheld the decision of the OFT to refuse the licence renewal. QCAT stated in a press release, "It was contrary to the public interest to send a message to the security industry that a private investigator who used contacts in that way could continue to work without interruption".
The detectives involved in supplying the information to the private investigator have since had their employment terminated by Queensland Police and plead guilty to using a restricted computer program.
You can read the decision of QCAT here.
A Sydney based SEO ("Search Engine Optimisation") company allegedly contacting 3rd parties in relation to an outstanding debt is currently being investigated by NSW Fair Trading over potential breaches of Australian Consumer Law.
The company, Search Results Specialists, appears to undertake their own debt collection activities and after having invoices go unpaid by La Mona Beauty it is alleged that they contacted 3rd parties, including the owners daughter's boyfriends employer, the owners son's boss as well as the Local Council and suppliers to the debtor.
Search Result Specialists claimed that La Mona Beauty owed $1,400 for SEO work performed however the owner, Nidhal Robb, denied utilising their services and asked for evidence which was not forthcoming.
It is being reported that the matter has now been settled by the parties, NSW Fair Trading have indicated that since 2014, 64 complaints have been received about Search Results Specialists including 12 in this year alone.
While this is certainly not an isolated incident for Search Results Specialists it should serve as a reminder to anyone undertaking the collection of debts that you must comply with not only Australian Consumer Law but also the ACCC / ASIC Debt Collection Guidelines.